Toshiba to report US$6 bln writedown amid nuke cost overruns

Toshiba Corp. will detail a writedown of close to US$6 billion after bruising cost overruns at its US nuclear arm, turning investor attention to the Japanese group’s efforts to fix that and other balance sheet headaches.

The TVs-to-construction conglomerate warned of a potential multi-billion dollar nuclear writedown in December, a year after a US$1.3 billion accounting scandal, Reuters reports.

Sources familiar with the matter say the final charge, to be detailed alongside quarterly earnings, will be as high as 700 billion yen (US$6.2 billion), a sum which alone would wipe out the company’s shareholder equity.

Toshiba, which has seen its market value almost halve since the prospect of a writedown emerged in December, is also expected to outline the prospects for its nuclear arm and update investors on efforts to raise capital, including through the sale of a stake in its flagship memory chips business.

“The question for Toshiba is how is it going to move forward,” said Masahiko Ishino, an analyst at Tokai Tokyo Research Center.

He added Toshiba would need to show how it could stay competitive in the cash-generating but capital-intensive memory chip industry, given its battered balance sheet.

Toshiba has offered a 19.9 percent of its prize chips business to investment funds and rivals including Bain Capital, SK Hynix and Micron Technology.

On Thursday, a source said that Toshiba had received bids of between 200 billion yen to 400 billion yen for the flash memory stake, a range that could cover the 300 billion yen the company wants to raise. It prefers multiple investors.

Toshiba is a pillar of Japan’s business establishment. Born in the tumult of Japan’s emergence from centuries of isolation, it made Japan’s first light bulb and was a pioneer in laptop computers. Toshiba’s 190,000 workers, employed at some 500 units, likely will make it too big to fail.

But as with other established Japanese firms that have dodged financial collapse, such as liquid crystal display inventor Sharp Corp., Toshiba could face protracted pain.

Toshiba agreed to buy that unlisted meter maker for US$2.3 billion in 2011 to tap smart grid demand that at the time was expected to grow six-fold to around US$70 billion in 10 years. At the end of September, the goodwill value of Landis+Gyr was 143.2 billion yen (US$1.3 billion).

Other stumbling blocks for Toshiba include a US$7.4 billion commitment four years ago to buy US liquefied natural gas believing that would help sell power plant turbines.

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